Cantillon

YESTERDAY, WHILE shareholders were criticising Tesco chief Phillip Clarke’s £1.6 million pay packet at the group’s agm in Cardiff, the union representing the grocer’s 13,000 Irish workers announced that they voted in favour of a 2 per cent pay increase.

Tesco will pay the increase, negotiated by trade union Mandate, from next January. It will be the first in five years, but there is no getting away from the fact that a big player in a sector hard hit by recession, retailing, has agreed to boost pay.

Mandate’s assistant general secretary, Gerry Light, signalled that the union does not intend to stop there. He said that Tesco’s offer set a significant benchmark, and combined with an increase awarded at Marks Spencer, sets a trend that Mandate wants followed across retailing.

One Tesco shareholder should applaud the deal: CtW Investment Group, the activist fund associated with the US labour union-backed movement Change to Win, which Tesco chairman Richard Broadbent criticised yesterday for “aggressively” trying to unionise its US operation. Presumably, the Irish deal sets a trend that Tesco does not want followed across the rest of the group.

No change at the top for Boucher

THE TIMING of the announcement by the Central Bank that Ritchie Boucher and Kevin Murphy had survived the fitness and probity tests was to say the least unfortunate.

It came the day after the International Monetary Fund concluded that Ireland is undergoing the costliest banking crisis of any advanced economy since the Great Depression.

According to the IMF the fiscal cost (including bank recapitalisations and asset purchases) of the banking crisis has amounted to 41 per cent of gross national product (the monetary value of everything we produced last year).

The notion that two Irish banks continue to be managed by individuals who were directors of their respective institutions in the run-up to the fiasco does not play well in the court of public opinion.

Not least because the Government had been happy enough to go along with the public perception that the fitness and probity tests were the mechanism by which the boards of the banks would be cleaned out.

Boucher and Murphy clearly thought otherwise and fought their corner successfully, with the Central Bank concluding that it has “no reason to suspect the fitness and probity of those individuals”.

In the case of Boucher, the decision was arrived at only after it received an external opinion from an unnamed senior counsel.

So where does that leave us now? Not in a great spot is the answer. The Central Bank’s attempts to draw a line under its ineffectual past have been dealt a blow. Murphy is leaving as planned later this year, so it is at best a bitter-sweet moment for him. The only out-and-out winners are Boucher and Bank of Ireland’s influential North American investors who publicly flexed their muscles in his support.

Meanwhile the public is understandably left even more cynical than usual about banks, bankers and accountability.

FOR SOMEONE who has rarely shirked an opportunity to speak his mind, the governor of the Central Bank was strangely quiet on the outcome of the European summit yesterday, declining the opportunity to respond to questions on the topic.

“It’s a day for the politicians,” Patrick Honohan told The Irish Times when asked to comment following his speech at the Institute of European Affairs conference on the euro zone crisis.

And it was indeed a day for the politicians, as they took to the topic with some gusto.

Tánaiste Eamon Gilmore declared that the European Commission’s decision to allow European rescue funds to lend directly to recapitalise banks was a “major game changer”, while Taoiseach Enda Kelly described the move as a “seismic shift” in European policy.

Elsewhere, however, the move was treated with a little more scepticism.

UCD economist Karl Whelan urged “serious caution” on the commission’s declaration, arguing that there is “lots of negotiating still to be done and premature celebrations can be counter-productive”.

Writing on his blog, chief economist with Kleinwort Benson Investors Eoin Fahy said that “it’s too early to conclude that this is a turning point in the crisis”, although he added that it was also too early to conclude that it is not.

And while the debt markets seemed to react positively to the news from the summit, with the yield on Irish bonds falling well below the 7 per cent level at which a bailout was called for, it’s worth noting that they remain at an unsustainable level.

THIS WEEK

Tuesday sees the judicial review of the appointment of receivers to certain assets of Treasury Holdings by Nama.

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